COVID-19 SUPER EARLY RELEASE - IMPORTANT GUIDELINES

16 April 2020

The ATO has published guidelines for the process and procedures of the COVID-19 Early Release of Superannuation (“Early Release”).  Registration of interest has commenced and applications will open from 20 April 2020.  For SMSFs, eligible members should meanwhile collate account information, ensure cash flow, get ready to apply and register interest. Once an application has been submitted it cannot be varied.

The ATO expected in excess of three million applications for the Early Release.  By the end of 8th April 2020, a total of 617,000 registrations of interest have been made through MyGov.

Application

Eligible super fund members are allowed to withdraw up to $20,000 of super benefits in two applications of up to $10,000 each for 2019-20 and 2020-21 financial years respectively.  Only one application can be submitted for each financial year. If the application submitted is less than $10,000, there is no mechanism to top up the balance.

  • For 2019-20 - Applications can be made from 20 April 2020 to 30 June 2020.
    For 2020-21 - Applications can be made from 1 July 2020 to 24 September 2020.
  • This measure will cease after 24 September 2020.
  • There are two ways to apply. The member can complete the ATO application form online through myGov or call the ATO call centre to access myGov to apply.  There will be no paper form option.

Please click the SUPERCentral article "COVID-19 EARLY RELEASE OF SUPERANNUATION" for full details of the criteria of eligibility for super fund members.

The process

  • The member is expected to self-assess to determine eligibility and self-certify.  Evidence is not required with the application but the member must retain evidence to support their application.
  • To apply, the member has to authenticate themselves in myGov.
  • Once authenticated, a list of the member’s available fund accounts will be displayed and the member can choose one or multiple accounts and the amount to be released from each account, up to the $10,000 yearly limit.  As the last account balance reported in most cases is 30 June 2019, a member can request more than the account balance displayed but must ensure that funds are available.
  • The member has to provide details of the bank account (account name, BSB and account number) to which the released benefits will be paid and authorise the ATO to provide this information to the super fund.

The determination

Once the application has been processed, the ATO will send a Determination to the member, available in the member’s myGov inbox within 2-3 days.  For funds other than SMSFs, the ATO will also provide notifications to the super fund.  SMSF fund members will have to inform their fund of the Determination so that payment can be made.

Role of SMSF trustees

Eligible SMSF members who apply for Early Release have dual capacities in this process.  They are also the trustees, or directors of the corporate trustee, of their SMSF.  As the trustee, they have responsibilities to ensure cash flow to meet payments and to administer the Early Release in a proper manner.

  • Ensuring cash flow may involving liquidating assets and updating the investment strategy.
  • Early Release payments can only be made from the preserved and restricted non-preserved components of the member’s benefits. They cannot draw upon amounts from retirement phase account based income streams comprising of unrestricted non-preserved benefits to fund any part of the Early Release.
  • The proportional rule applies to the benefits released.  It has to include both tax-free and taxable components calculated in the same proportion of these components that make up the member’s total unpaid benefits.
  • The Early Release payments are tax-free.  It is non assessable and non exempt income.  PAYG withholding will not be required.
  • The criteria of eligibility is based on self assessment.  The onus is on the member to retain evidence of eligibility, for inspection or audit if required.
  • The trustee in the exercise of care, skill and diligence has a duty to maintain records of the ATO Determination and trustee resolution of the Early Release payments.

Transition to retirement income streams

TRIS is made up of preserved and restricted non-preserved benefits and can potentially be accessed to fund COVID-19 early super release payments.

By the same token, the commutation amount of a TRIS cannot be cashed out immediately as these benefits are preserved.  Under current rules, these can only be withdrawn when the member has met a condition of release with nil cashing restrictions and the benefits become unrestricted non-preserved (Regulation 6.01AB SIS Regulations)

The COVID-19 Early Release provisions provide an exception.  To comply with both Regulation 6.01AB and the new Early Release provisions, the TRIS amount can be accessed through a two-step process. Firstly, the TRIS commuted amount has to be “rolled back” to accumulation phase in accordance with fund rules and pension terms.  The preserved and restricted non-preserved benefits in accumulation can then be released through the Early Release measure, up to the amount of the ATO Determination.

Documentation

The SUPERCentral document packages prepared by our associated law firm Townsends Business & Corporate Lawyers are updated to contain instructions and templates to assist SMSF trustees with their above documentation obligations.

For further assistance, please contact us on 02 8296 6266.

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